The Wedge

Posted: 8 Feb 2000

See all articles by Laszlo Goerke

Laszlo Goerke

University of Trier - Institute of Labour Law and Industrial Relations in the European Union; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: November 1999

Abstract

It is often argued that the quantity which is traded on the market is independent of the side of the market which is taxed. However, this assertion need not hold, especially in imperfectly competitive markets like that for labour. Taking an efficiency wage economy as an example, it is shown that the legal incidence of social security contributions will affect the economic incidence if unemployment compensation is subject to social security constributions. Since this is the case in numerous OECD countries, the wedge between producer costs and the net wage might be an inappropriate device for measuring the impact of social security contributions on wages and employment.

JEL Classification: H22, H55, J41

Suggested Citation

Goerke, Laszlo, The Wedge (November 1999). Available at SSRN: https://ssrn.com/abstract=194570

Laszlo Goerke (Contact Author)

University of Trier - Institute of Labour Law and Industrial Relations in the European Union ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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IZA Institute of Labor Economics

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